Finance
How does a carbon price paid outside the EU reduce CBAM certificates owed?
When and how a carbon price effectively paid in the country of origin reduces the number of CBAM certificates an authorised declarant must surrender.
Applies to EU CBAM declarants importing from a third country that levies its own carbon price; the adjustment mechanism is defined under the CBAM Regulation.
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Direct answer
Where an authorised declarant's country of origin already charges an effective carbon price on covered goods, that price can be deducted from the number of CBAM certificates the declarant must surrender. The deduction applies only to a carbon price actually and effectively paid, not a nominal rate.
What counts as a carbon price
An eligible carbon price is one that is effectively paid on the embedded emissions in the country of origin, in the form of a tax, levy, fee, or emissions allowance. The price actually borne by the producer is what counts; rebates, exemptions, and free allocations reduce the eligible amount.
Third country carbon price adjustment
SourcesOnly the carbon price effectively paid in the country of origin reduces certificates to surrender. Rebates and free allocations are excluded.
Regulation (EU) 2023/956, Article 9
Evidence the declarant must keep
The declarant must keep documentary evidence of the carbon price effectively paid, certified where required by the Regulation, for the standard record-keeping period. The supporting evidence is part of the annual declaration verification.
How the reduction is calculated
The number of CBAM certificates to be surrendered is reduced by the carbon price effectively paid per tonne of embedded emissions in the country of origin, converted into euro at the relevant exchange rate, and divided by the average weekly EU ETS allowance price used for the certificate. The reduction cannot exceed the certificate obligation for the same embedded emissions, so any over-payment in origin does not create a refund.
Currency conversion and timing
The carbon price is converted to euro using the exchange rate applicable when the price was paid, not when the certificate is surrendered. Declarants record both the original-currency amount and the converted euro value so verifiers can reconcile the evidence trail against the producer's payment receipts.
Interaction with India and other non-EU schemes
The adjustment is mechanism-neutral. A jurisdiction operating an emissions trading scheme, a carbon tax, or another carbon pricing instrument can supply eligible evidence if the producer actually paid a price on the embedded emissions. The Indian Carbon Credit Trading Scheme is at an early operational stage at the time of publication.
Verifier role
The accredited verifier examines the carbon-price evidence as part of the annual declaration verification. The verifier checks that the price was actually paid (not just notionally levied), that it applied to the same emissions reported as embedded, and that no rebate, exemption, or free allocation has been double-counted.